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But the huge grant now means the work can start. Councillor Martin Rawson, cabinet member for regeneration and economy, said he was delighted funding had been secured.

He said: “This is a welcome announcement which will have a positive outcome for local people, businesses and commuters."

More capacity is needed to help the station cope with the city centre’s rising population.

The residential market in the city centre is booming, with nearly 2,400 new homes having been built or in construction – and thousands more are planned at sites including Castleward and the former Derbyshire Royal Infirmary site.

Derby City Council submitted a bid for funding earlier this year and the authority has now been allocated £3.6m from the Government’s National Productivity Investment Fund (NPIF), which aims to close the north-south gap on economic prosperity.

Derby Bus Station is set to undergo a nine-bay expansion (Image: Ian Hodgkinson / Picture It)

A planning application detailing the proposed bus station extension will be made in early 2018. Groundwork on the land where the extension will go, towards the River Derwent, has already started.

If approved by councillors, additional waiting areas and nine additional bays will be created to accommodate new and increased services from new housing sites.

The project will also create additional space for buses entering the concourse to ease congestion.

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Mr Rawson said: “The bus station currently accommodates over 500,000 departures per year, and there are a number of services that terminate on-street, which can create congestion in the city centre.

“With the Derby Urban Area set to grow by 18,000 new homes by 2028, it is essential that investment is made to be able to support and encourage people to travel by sustainable modes.”

In June, Mr Rawson said the council was preparing a funding bid of £5 million. Despite receiving less from the Government, he said £3.6 million was enough for the scheme to go-ahead.

He added: “This extension will not only allow us to extend the number of services into the city from these new developments, but will further improve journey times, and reduce congestion in the city centre.

“This will encourage more residents to travel by bus, which will positively contribute to an improvement in air quality in Derby.”

Work to prepare the site for the planned expansion is already under way

The funding announcement has also been welcomed by bus operator Trent Barton. The company’s director of service delivery, Tom Morgan, said: “At Trent Barton we are fully supportive of Derby City Council’s NPIF bid which will assist with the continual investment in public transport infrastructure.

“The investment will ensure the high standard of delivery can continue, improve and grow in line with the growth we are currently seeing in public transport use.”